Hedge Funds Flip Long on Bitcoin as CME Basis Trade Fades
Hedge funds trading Bitcoin futures on the Chicago Mercantile Exchange have moved into net-long territory, marking an unusual change in positioning, according to CryptoQuant CEO Ki Young Ju.
The shift indicates that professional traders may be becoming more confident in Bitcoin’s upside after years of maintaining predominantly short futures positions.
Ki Young Ju said CME hedge funds have moved from structural shorts to net longs, a notable reversal from the positioning typically associated with the basis trade. He noted that a conventional carry strategy would not normally produce an aggregate net-long futures position, suggesting that some institutional investors are now taking a direct bullish view on Bitcoin.
For years, leveraged funds have generally been net short CME Bitcoin futures because of the basis trade. The strategy involves purchasing spot Bitcoin or ETFs while selling futures contracts at the same time. Traders seek to capture the premium between the futures and spot markets as it converges, rather than relying on Bitcoin’s price to rise.
This approach has been a major reason hedge funds have maintained negative futures positioning for an extended period.
But declining futures premiums have made the strategy increasingly unattractive. The annualized three-month Bitcoin futures basis is now around 3%, below the roughly 3.8% yield offered by two-year U.S. Treasury bonds.
The narrower spread leaves traders with less incentive to pursue the basis trade, particularly after considering financing expenses, margin requirements and the risks associated with executing the strategy.
Bitcoin has since recovered above $65,000 after falling to approximately $58,000 on July 1. Against that backdrop, the shift from persistent futures shorts to a net-long position provides another sign of improving institutional sentiment.
Some of the move may simply reflect hedge funds closing basis-trade shorts. Even so, the fact that aggregate positioning has crossed into positive territory means CME leveraged funds now have more long contracts than short contracts.
That represents a notable departure from their traditional positioning and could signal growing institutional conviction that Bitcoin has further room to climb.
